Everyone’s dream is to be financially stable after retirement. For that reason, many people work hard, save, and invest during their long working careers. But even at that, the guarantee of a hitch-free post-retirement lifestyle is not sure. If you find yourself worried about meeting up with financial demands in your retirement phase, then it is high time you looked into more reliable financial options, one of which is taking a reverse mortgage. This term may sound foreign to you; hence, I am going to explain everything you need to know about this type of loan, including how it works.
How Flexible is a Reverse Mortgage?
Unlike the traditional home loans that put you under pressure to pack back every month, a reverse mortgage does precisely the opposite – it pays you to cater to your financial obligations. Exciting right? It does not just stop there; you can decide to defer your loan repayment for as long as you want, provided that you can pay your property taxes and insurance, keep up with the home maintenance cost, and most importantly, reside in the home. In order words, you receive an additional stream of income staying at home.
It would suffice to state that you do not have to worry about foreclosing your home to meet up with monthly payment deadlines, as with the standard mortgage. What mortgage plan offers a better deal than this? I am yet to see one.
What Else Should You Know?
With a reverse mortgage loan you do not have to worry about post–retirement. In actuality, you can earn your loan in the form of monthly paychecks – see it as your pension payment. Other options include setting it up as a line of credit (for those who need credit facilities from time to time) or receiving it as a lump sum (for individuals with several needs to cater to at a time). Whichever option you select, this unique type of loan has you covered.
You may decide to invest some amount into assets that will yield you returns to pay back the loan at a later date – it all depends on your preference. Having this type of loan at your disposal makes it easy to meet up with emergencies, like accidents and medical expenses.
How About the Safety of My Assets?
Of course, your assets are in good hands. You do not have to worry about losing them to default on the payment, unlike if you had a regular mortgage. Besides, with the flexibility it provides, it is hard for you to run into such a situation. And even if you are unable to come up with the payment, you can decide to foreclose your home at any time and pay off the loan. If the money from the home sale is not enough to cover the mortgage, the lender will forgive the remaining money.
Are There Clauses to This Loan?
Yes. Just like any other type of loan, a reverse mortgage comes with its terms and conditions. To begin with, you must be 62 years and above and must be a legal homeowner. Also, your property must be your primary place of residence. Another factor worth noting about retaining the validity of this loan is that you have to keep up with the cost of maintaining the home, pay your property taxes and insurance when due, and live in the home. The last condition does not imply that you cannot go on a vacation. However, long-term absences from your home may pose a concern to the lender.
If you fail to comply with the requirements pertain to the property taxes, insurance, and maintenance, the lender may cancel your loan agreement and foreclose the house to make up for the loan. So, you have to be sure about your capacity to satisfy these demands.
If you are of the age 62 years and above, and you have a permanent residential home, then this loan option is available. To have access to your funds, ensure that you pay off your current mortgage.